Three to buy
Anglo American
(The Sunday Telegraph) Those who think that the virus lockdown will be followed by a rapid return to work would do well to invest in cyclical stocks while they are going cheap. The diversified miners have got their balance sheets in order in recent years and are poised to benefit from any recovery in commodity prices. Weakening emerging market currencies and 18-year lows in oil prices will keep Anglo American’s costs under control. On seven times earnings the shares are a reasonably-priced way to bet on a global recovery. 1,218p
Anpario
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(The Mail on Sunday) This small Aim-listed business makes natural, healthy additives for animal feed. Employees have been working “flat-out” during the shutdown as farmers seek to feed both their livestock and the country. The group’s performance in 2019 was robust thanks to healthy sales in Latin America, parts of Asia and the Middle East. The fact that the firm has no debt and £13m in cash in the bank is a further attraction. Concern about the quality of animal feed and its effects on human consumers will only grow over coming years, so the stock is a buy. 325p
Cranswick
(Shares) Shares in this top-quality food producer have dodged the overall market slump. Cranswick is benefiting from two tailwinds: firstly, house-bound consumers are opting for its premium products to create “family treats”. Secondly, a shortage of meat in China after African swine fever opens up new export opportunities. Strong cashflow and a conservative balance sheet are further plus points. 3,630p
Three to sell
FedEx
(The Times) This American courier service operates more than 180,000 lorries and vans and 679 aircraft worldwide. The world’s largest supplier of express deliveries is certain to be hit by the steep drop-off in business activity and significant disruptions to logistics supply chains. More online orders by consumers and cheaper oil prices bode well. But with the shares on 23 times earnings there are cheaper options elsewhere following the market crash. Avoid. $114
G4S
(Investors Chronicle) For a company that specialises in handling cash, G4S has proven a poor steward of shareholders’ money in recent years. The group’s ‘secure solutions’ business accounted for over four-fifths of revenue last year. Management plans are to shift into “technology-enabled” security areas that offer a higher margin, but a disappointing execution track record does not inspire confidence. A “pensions millstone” and £2.1bn in net debt also militate against a turnaround. Over a fifth of revenue comes from cyclical industries so Covid-19 will depress sales. Sell. 88p
Next
(Motley Fool UK) Fashion retailers are bearing the brunt of the pandemic, with like-for-like sales down 25.9% last month. Next makes 43% of its sales from now closed physical outlets, but its burgeoning online operation cannot come to the rescue; it recently stopped taking orders in order to protect the health of warehouse and distribution workers. Ignore the 5% dividend yield. The sales collapse means the payout will be scrapped soon. Avoid. 3,429p
...and the rest
The Daily Telegraph
Shares in many housebuilders have halved but the structural imbalance between housing demand and supply is not going away. A strong balance sheet and opportunities to buy up land on the cheap make Berkeley Group the pick of the bunch (3,615p).
The Mail on Sunday
More frequent hand-washing has seen water usage jump by 10% in some households, making utility firm Severn Trent, which yields 4.7%, a defensive pick for uncertain times. Existing investors should hold and new buyers should take a look (2,149p).
Shares
Many commercial landlords are being forced to slash rents, but Supermarket Income Reit offers a rare safe haven. Buy (105p).
The Times
The work-from-home boom has generated plenty of buzz around online video conferencing platform Zoom yet the risk-averse will not want to jump in lest its astronomical $48bn valuation should come crashing back down to earth ($146). Self-storage business Safestore has managed to maintain its dividend but could face a tricky time as housing transactions dry up. On 21 times forecast earnings the shares seem fairly priced given the long-term growth prospects. Hold (637p).
Investors Chronicle
Buy drinks maker Diageo: its strong brand, financial track record and long-term growth should leave it “shaken, not stirred” by the pandemic (2,513p). The global lockdown will only accelerate the shift towards online retail, so buy into logistics property company London Metric (163p). The year ahead will be difficult for online fashion retailer Boohoo, but a share price pullback creates an appealing entry point into a long-term winner. Buy (191p).
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